An analysis of CAS Cardiff FC v. FC Nantes (Emiliano Sala) – on the limitations of sports arbitration and the explanation of football-related agreements

Despite the severe impact the passing of Sala had on the world of football, it turned out that the plane crash would soon result into legal complications between the parties involved in the transfer. Nantes considered that, at the moment of the fatal accident, Sala had already transferred to Cardiff. Therefore, Cardiff was obliged to perform its obligations arising from the transfer agreement (hereinafter: the “Agreement”). In other words, Nantes ordered Cardiff to pay the agreed transfer sum. Cardiff on the other hand, argued that certain conditions precedent contained in the Agreement were not complied with, as a result of which Sala had not been validly transferred to Cardiff. Moreover, it deemed that Nantes was, at least partially, responsible for the fatal plane crash, and therefore liable for the damages that ensued. This stalemate between the parties resulted in the initiation of multiple legal proceedings. Nantes submitted a claim before the FIFA Players’ Status Committee (hereinafter: the “PSC”) in which payment of the transfer was claimed. Simultaneously, multiple criminal and civil proceedings were initiated in front of the courts of both England and Wales and France.

As a result, the internal arbitration bodies of the football industry, PSC in first instance and the Court of Arbitration for Sport (hereinafter: the “CAS”) on appeal, were faced with intricate questions relating to their competence to rule over civil and/or criminal claims and the traversal of external proceedings filed before domestic courts. The proceedings before the PSC and CAS were two-sided. On the one hand the clubs were in disagreement whether the relevant conditions precedent for the performance of the Agreement were fulfilled. In other words, the clubs clashed on whether Sala had already transferred from Nantes to Cardiff. Nantes claimed that the Agreement was valid and ordered Cardiff to comply with its financial obligations arising out of it. Cardiff however, considered the Agreement to be null and void and introduced a set-off claim pertaining to the possible civil and/or criminal liability of Nantes. Furthermore, questions arose whether the PSC and CAS were competent to take the (possible) outcome of the civil and criminal proceedings into account, by including the set-off claim introduced by Cardiff in the arbitration proceedings. Especially the arbitral award delivered by the CAS provides an extensive breakdown of the limitations of scope of internal proceedings submitted to the arbitration bodies of the sporting realm and the explanation of sport-specific documents such as a transfer agreements.

Decision of the FIFA Players’ Status Committee

On 26 February 2019, Nantes lodged a claim with FIFA against Cardiff, claiming the payment of the first instalment of the transfer fee of €6 million. Cardiff requested that proceedings were to be stayed pending the conclusion of multiple investigations and civil and criminal proceedings. Moreover, Cardiff objected the substance of the claim filed and argued that Sala had not yet been transferred to Cardiff. Hence, no payment obligation rested with Cardiff. In its decision the PSC awarded the claim of Nantes, ordering Cardiff to pay the first instalment of the transfer fee, as all conditions precedent contained in the transfer agree were considered to be fulfilled. Moreover, it was deemed that the current dispute between the clubs was of a purely contractual nature, i.e. the explanation of the Agreement. The PSC found that it was not in the position to consider on the alleged civil and/or criminal liability, as this lies outside its competence. Therefore, the internal proceedings in front of FIFA would not affect or be affected by the outcome of the other proceedings being conducted in different legal realms – i.e. the civil and criminal proceedings pending.

Proceedings before the Court of Arbitration for Sport

Cardiff opposed the PSC decision, and in accordance with article 57 FIFA Statutes filed its appeal with the CAS. Essentially, Cardiff submitted similar arguments as it had raised before the PSC, though more thoroughly substantiated this time. This forced the CAS panel to deliver a landmark 81 page long arbitral award. For the purpose of this analysis the findings pertaining to the competence of the CAS to decide on set-off claim introduced by Cardiff and the interpretation of football-specific agreements, will be reviewed in greater detail. The observations of the CAS regarding the conditions precedent of the Agreement will be omitted from the analysis, as these are less relevant for the precedent created by this award.

Submissions of the parties

Cardiff argued that the Agreement was to be regarded as null and void on the basis of article 2.2., which stipulates that if the conditions precedent contained in the Agreement were not satisfied by 22 January 2019, the Agreement would cease to have legal effect. According to Cardiff, three out of four conditions precedent were not met before the aforementioned deadline. As a result, Cardiff deemed that Sala was not a Cardiff player at the moment of the fatal plane crash. Therefore the Agreement was to be considered as to never have existed. Moreover, Cardiff argued that Nantes was (at least partially) responsible for the death of Sala, making Nantes liable for the financial damages suffered. As the proceedings regarding both the civil and criminal liability of multiple parties involved were already pending before the courts of England and Wales and France, Cardiff requested the CAS, if it deemed the Agreement to be valid, to set-off any financial obligations arising out of the Agreement against the alleged damages to be paid by Nantes. More specifically, it considered that Nantes was liable for the plane crash through the acts of the agent that brokered the deal on behalf of the French club, Willie McKay. This agent was responsible for the arrangement of the fatal flight, yet solicited an unlicensed pilot. In essence, Cardiff thus primarily posited that the Agreement should be deemed to be null and void, as a result of which Cardiff is not obliged to pay any transfer fee to Nantes. Subsidiarily, and only in case the CAS would conclude that the Agreement was valid and binding upon the parties, that any awarded amounts are to be set-off against the possible civil liability of Nantes surrounding the circumstances of the fatal crash.

Nantes, on the other hand, argued that the Agreement was valid and that all conditions precedent were fulfilled before Sala passed. Hence, in line with the legal principle of pacta sunt servanda, Nantes requested the CAS to oblige Cardiff to comply with the financial obligations arising from the Agreement. The nature of these proceedings can thus be characterized being primarily contractual, though the parties involved are in dispute whether the contract is valid and binding in the first place. With the contractual questions pertaining to the interpretation and performance of the Agreement. In addition, the CAS was faced with questions in relation to civil and/or criminal liability as a result of Cardiff’s set-off claim. Despite the mainly contractual nature, the majority of the arbitral award is dedicated to procedural issues surrounding the jurisdiction of the CAS to include Cardiff’s set-off claim.

Competence to include set-off claim

The jurisdiction of the CAS, as any arbitration/dispute resolution body, is inherently limited by its regulatory framework. For the CAS these limits are somewhat more complex due to the dual function it performs, having both an ordinary arbitration division and an appeals division. These divisions correspond to the two main types of CAS jurisdiction to which diverging procedural rules may apply. This case concerned an appeal filed against a decision passed by an internal arbitration body of FIFA. Therefore, the mandate of the CAS to adjudicate the set-off claim depends on whether the PSC was competent to decide on the matter, as the competence of the CAS cannot exceed that of the arbitration body in first instance. In other words, the appeals division of the CAS, is bound to the arbitration agreement of the parties in first instance. This doctrinal approach characterizes the disparity between the different divisions of the CAS, in the sense that the scope of appeal proceedings is limited to the competence of the arbitration body of first instance.

Lacking any regulatory ground to either include or exclude set-off claims from the jurisdiction of the PSC, the CAS panel analysed whether the analogous application of the Swiss Code of Civil Procedure (hereinafter: the “CPC”), allocated said jurisdiction. It was however duly concluded that none of the possible interpretations of the relevant provision of the CPC, Article 377(1), provided the PSC with any jurisdiction. The panel argued, correctly in the opinion of the author, that the adjudicatory bodies of FIFA are highly-specialized for the specific purpose of settling football-related disputes. Hence, the PSC does not provide for a forum of general jurisdiction, thereby inherently limiting its jurisdictional subject-matter. This follows inter alia from Articles 22, 23(1) read in conjunction with Article 1(1) of the FIFA Regulations on the Status and Transfer of Players (hereinafter: the “RSTP”). Due to this highly specialized nature, the arbitration bodies of FIFA are not the proper forum to rule over set-off claims regarding civil and/or criminal liability in light of a fatal airplane crash. Rather they are established to seek and enforce the FIFA standards in the international football industry. Moreover, the CAS deemed that the FIFA regulations are inadequate and incapable to adjudicate over Cardiff’s set-off claim. Hence, the CAS ruled that the PSC rightly excluded Cardiff’s set-off claim from its decision.

Interpretation of the transfer agreement

The main issue to be settled by the panel essentially revolved around the validity and interpretation of the Agreement. Cardiff submitted that it should be interpreted in accordance with the law chosen by the parties, i.e. the laws of England and Wales. The CAS however, deemed that, above all, the Agreement must be interpreted objectively and in light of the RSTP. Thereby leaving ample room for the subjective intentions of the parties to the Agreement. As a result, notwithstanding any choice of law clause in the Agreement, the relevant provisions that address the substantive elements of an international transfer of a football player, must be interpreted in accordance with the internal regulations of FIFA. Subsequently, the panel disregarded Cardiff’s submissions pertaining to the business common sense interpretation of the Agreement and the application of either English or French law. The Panel was reassured of its findings by the circumstance that the relevant provisions of the Agreement that needed interpreting, more or less mirrored the various steps that need to be taken in the event of an international transfer, as is reflected by Articles 5 and 13 RSTP and Articles 4 and 8 of Annexe 3 RSTP.

Based on the above, the panel concluded that the appealed decision of the PSC was to be upheld. Therefore, the transfer of Sala from Nantes to Cardiff was completed at the moment of the fatal plane crash, as all conditions precedent contained in the Agreement were fulfilled. As a result, Cardiff was ordered to pay the first instalment of the transfer fee that had fallen due in January 2019. However, the panel ruled that it could not award the other two instalments which had fallen due in the meantime, as the proceedings before the PSC were initiated when only the first instalment was payable. Awarding the other two instalments would automatically lead to the CAS exceeding its mandate. Cardiff will however still be obliged to pay the two remaining instalments, the CAS has after all determined that Sala’s transfer was already finalized prior to the accident.

Analysis

The arbitral award delivered by the CAS is rather extensive and will serve as an important precedent in many sports-related arbitration proceedings to come. Yet, a number of specific issues have been left unresolved, which may leave the football industry with questions pertaining to the drafting of future transfer agreement. Especially the aspects relating the allocation of risks in transfer agreements have not been clarified. In this specific case Cardiff bore the financial risk of the fatal plane crash, as the objective interpretation and application of the RSTP did not provide for any other possible outcome. However, whether clubs can contractually allocate certain risk to any of the parties remains uncertain. Buying clubs may be incentivized to try to shift the risk for the safe transportation of the transferred player to the selling club as a result of this judgement. However, whether this anticipated practice is possible in light of the objectives of the RSTP remains to be seen. This allocation of risk can after all be interpreted as a derogation of Annexe 3 of the RSTP, which provides the substantive steps that clubs need to take in the FIFA Transfer Matching System in order to complete an international transfer.

Through its analysis of the Agreement, the CAS explicitly recognized that the internal regulations of sports associations can take precedence over national laws, to the extent that the matter at hand relates to the internal affairs of the sport. Interpreting football-specific agreements, in accordance with the applicable national laws designated by the parties, will after all result into a fragmentation of outcomes. This however would be a direct contradiction of the objectives on which the CAS was founded. Hence, in order to ensure the uniform adjudication of transfer-related disputes, the internal regulations of FIFA should take precedence. This makes sense, the FIFA regulations are specially drafted to facilitate international transfers of football players, this cannot be said of national laws. However, interestingly enough the Panel concluded that in the end multiple laws may be applicable to the different legal aspects in the same dispute arising from the same contract, depending on whether the particular issue is addressed in the various FIFA regulations.

Moreover, the CAS set clear limits on its competence to rule over disputes that lay outside the realm of sports. Though the CAS limited its jurisdiction to the mandate that the PSC had in first instance, the CAS award seems to implicitly confirm that any set-off which are not directly sports-related lay outside the jurisdiction of the CAS. Taking into consideration the fundamental rationales on which the CAS was founded, this conclusion makes sense. Just like the internal arbitration bodies of FIFA, the CAS is a highly-specialized court established for the purpose of settling sports-related disputes. This position is inter alia confirmed by the CAS Code and statutes. In case the panel had concluded that it was competent to include Cardiff’s set-off claim, the jurisdiction of the CAS would be significantly extended in future cases. This could in turn result in the CAS being faced with civil and/or criminal claims for which it is not suited to decide on.

Conclusion

The well-reasoned decision of the CAS panel in the arbitration proceedings between Cardiff City and FC Nantes, concerning the transfer fee of the late Emiliano Sala, gives a unique insight into the procedural and substantive functioning of sports-related arbitration. Especially the aspects relating to the possibility for the CAS and/or the internal arbitration bodies of FIFA to include a set-off claim in the proceedings and the interpretation of football-specific documents such as a transfer agreement will set important precedents for the sports law industry. Whether the arbitral award will induce structural changes to the way transfer agreements are drafted, and more in particular the allocation of risk regarding an accident affecting the player, is remained to be seen as the CAS left a number of elements unanswered. Food for thought.